A Taxonomy of

Manufacturing Strategies

Group - 7:
Ankit Gupta
Baid Shikhar Rajesh

Himesh Anand
Kshitij Sareen
Nikita Agrawal

AGENDA
Introduction
Background
Methods
Analysis and Discussion

Conclusion and Summary

INTRODUCTION
Two core elements are central to the definition of a manufacturing

strategy as a functional sub-strategy

What the manufacturing function must accomplish?
The pattern of manufacturing choices that a company makes
structural or "bricks and mortar"
decisions about the manufacturing infrastructure

The pattern of choices followed by manufacturing must be

congruent with the manufacturing task

The demand that manufacturing choices and manufacturing tasks be
linked follows from the presumption that good designs meet
appropriate design criteria.

 Superior performance will follow for those firms

that develop congruence between their business

and manufacturing strategies
Though the basic elements of a manufacturing
strategy are commonly accepted, important
questions remain about how to operationalize
them, and about the nature of the connections
between task and choices.

Purpose of Paper
Identification of strategic groups of

manufacturers with similar manufacturing

tasks
Exploration of the central theme in the
manufacturing strategy literature

Background
Most of the research has recognized that firms can be classified by multiple variables into

groups which are best characterized by the "gestalt" of the communalities they share.
To categorize firms in terms of strategic decision variables
The "strategic group" research has discriminated between firms on the basis of
The scope of their business, as well as their resource allocation patterns
Classical industrial organization constructs such as the degree of competition, and
bargaining power
Their behaviour with respect to competitors or new opportunities
The driving force like cost-driven group , the technology-driven firms and the marketdriven
Here, the taxonomy is done by observing the apparent relationships between:
group membership,
business context,
manufacturing choice, and
manufacturing performance measures.

Methods
The Sample
The Respondents

The instrument
Identifying Strategy Type
Clusters
Caretakers
Marketeers
Innovators

The Sample
The data for this study were obtained from the 1987

Manufacturing Futures Project (MFP) Survey (Miller and

Roth 1988)
The annual Manufacturing Futures Project Survey is
specifically designed to gather information on competitive
factors pertinent to leading manufacturing business units.
A manufacturing business unit (MBU) is defined by the level
in the organization where a manufacturing strategy was
formulated

 The 1987 sample was pooled from two sources: a longitudinal

panel of businesses whose responses were obtained in previous

years, and a probability sample of businesses derived from the
1986 Duns Business Rankings Directory.
In 1987, the response rate for the longitudinal panel was about 40
percent; and from the probability sample, 23 percent.
An analysis was performed to determine whether there were any
significant differences between the longitudinal panel and the
probability sample.
A comparison of the financial and market performance of the
respondents with aggregate industry data suggests a nonresponse
bias. Respondents were more likely to be market share leaders
and financially more successful.

The Respondents
Manufacturing, completed the survey instrument. Social

scientists have long puzzled over the problem of "common

method variance" due to the bias associated with using a
single informant.
It is generally concluded that strong assessments of
convergent or discriminent validity cannot be made when
there is a single informant.

 Other steps to reduce response bias and measurement

error due to mono-informants.

The survey instrument was long and variables in each
section of the survey were randomly placed, reducing the
chance that respondents could cross check for their own
internal consistency
Internal and external checks for the reliability and validity
of taxons, as described in the next section, were also made.

The Instrument
The questionnaire focused on four broad categories of questions.
The first category determined the profile of the company or business

unit.
The second category addressed the competitive capabilities the
respondents planned to pursue, and thus the manufacturing task.
In the third section, the respondents were questioned on the
performance measures employed in manufacturing, the business unit
and in the company overall.
The fourth and largest category of questions probed for the key
action programs the respondents and their business units intended to
invest in over the ensuing two years. This fourth category of questions
attempted to tap the pattern of choices in the manufacturing strategy.

 The following list describes the competitive capabilities delineated in the survey that were

used as taxons in this research. Manufacturing executives in the sample were asked to rate
each competitive capability measure separately on seven-point, self-anchoring scales.
Low Price The capability to compete on price.
Design Flexibility The capability to make rapid design changes and/or introduce new
products quickly.
Volume Flexibility The capability to respond to swings in volume.
Conformance The capability to offer consistent quality.
Performance The capability to provide high performance products.
Speed The capability to deliver products quickly.
Dependability The capability to deliver on time (as promised).
After Sale Service The capability to provide after sale service.
Advertising The capability to advertise and promote the product.
Broad Distribution The capability to distribute the product broadly.
Broad Line The capability to deliver a broad product line.

Identifying Strategy Types

Cluster analysis was employed

The SAS AceCLUS procedure was used to obtain estimates of the pooled within-cluster
covariance matrix of firms

SAS Fastclus algorithm

The Fastclus procedure uses nearest centroid sorting

Limitations of the k means procedure include its sensitivity to outliers and the requirement
for fairly stable seed points

188 observations
6 were dropped due to missing data
18 not assigned to a cluster

Clusters

3 criteria were employed to determine the final number of clusters

Lehmann's ( 1979) suggestion cluster size between n/30 to n/60 models
between 3 and 6 clusters were considered
Increases in the tightness of the clusters ( R2 and pseudo-F statistic) 3 cluster

model provided the best fit

Managerial interpretability of the clusters on the defining variables using (a) ANOVA

and (b) Pairwise comparison tests of mean

The interpretation of the three manufacturing strategic groups

Caretakers
Marketeers

Innovators

(contd.)

Clusters

These interpretations are predicated upon:

(a) whether there are significant differences on the cluster means of the

competitive capability variables at the 0.05 level or less,

(b) the relative ranking of the importance of a competitive capability within a

cluster.

It is possible that a high ranking capability within a cluster may actually exhibit a
relatively low numerical score.

Cluster-I Care takers

18 members representing 11% of the cases

Low relative emphasis on the development of competitive capabilities appears to

prepare them for the minimum standards for competition

Dominant Competitive capability (Top rank priorities)

Price
Dependable delivery and speed
Conformance quality

Cluster-II Marketeers

Largest group 49% cases

Seek to obtain broad distribution, to offer broad product lines and to be responsive
to changing volume requirements

Top ranked priorities

conformance quality
Dependable deliveries
Product performance.

Also reflected - Price consciousness (low importance)

Marketeers were more likely to note after sales service as important than the
caretaker group.

Cluster-III Innovators

Second largest cluster 40% cases

Different in terms of their ability to make changes in design and to introduce new
products quickly

Common characteristics of Innovators and Marketeers Conformance

Performance quality

Dependability is also important to the innovators.

After sales service - statistically no significant differences between the innovators

and the Marketeers

Analysis and Discussion

Underlying Dimensions:

11 taxons representing the importance of the competitive capabilities succeeded in

generating a numerical taxonomy.

Market differentiation dimension: Depicts the requirement of the manufacturing firm to

distinguish itself from competitors by attributes of its products and services.
Importance given to product performance, conformance quality and after-sales
service.

Market scope: Reflects the magnitude of the customer base served by the business
unit. Broad distribution and volume flexibility are positively correlated with market
scope while design flexibility is negatively associated.

Analysis and Discussion

C Caretakers
M Marketeers
I Innovators

Analysis and Discussion

Caretakers:
Compete mainly on price and are on the low side of the market differentiation

scale.

Innovators and Marketeers:

More weight to product attributes, and thus appear on the high end of the market

differentiation scale.

However, unlike the marketeers who as a group have very broad distribution channels,
and thus are on the high end of the market scope scale (competing in high volume
mass markets with more stable product lines), the innovators emphasize
responsiveness to product change through design flexibility, which is associated with
the low end of the market scope scale (competing in specialty markets with a broad
range of tastes; hence design flexibility needed).

Analysis and Discussion

Industrial Mix:

Innovators:
The electronics (computer and electronic equipment manufacturers) and machinery

(machine tools, transportation equipment) industries are more likely to populated

by innovators.

Marketeers:
The industrial (components, intermediate goods producers), basic (chemical,

paper, primary metals firms) and consumer packaged goods (foods, cosmetics,
pharmaceutical manufacturers) are more likely to be marketeers.

Caretakers:
The caretakers are also most likely to be found among the industrial goods and

consumer packaged goods firms.

Analysis and Discussion

Context:

Innovators:
Have the least standardized (most customized) products.
Invest more heavily in R&D and stronger functional influence by Engineering /R&D in

setting the long run goals and strategies of the business unit.
Place more emphasis on increasing market share by developing new products for both

old and new markets.

Processes are characterized as a job shop.

Marketeers:
May develop new products for existing markets but they are less likely to emphasize

entering new markets with new products.

Caretakers:
Caretaker's products are most heavily standardized.
Processes are characterized as continuous process.

Analysis and Discussion

Action Programs:

Innovators:
The innovators' manufacturing strategy action program choices place significantly more

emphasis on programs that promise to shorten total product cycle times and on
developing new processes for their new products.
This appears to be congruent with a manufacturing task that prizes the ability to change

designs and introduce new products.

Marketeers:
Plan on strengthening their manufacturing operations through infrastructural changes,

particularly those that will cut costs and improve quality.

Emphasis on changing labor /management culture and streamlining their workforces.

Also hope to attack quality problems through zero defect programs and statistical
process control.
Consistent standardized products, quality, dependability.

Analysis and Discussion

Caretakers:
Competing on price; tend to place relatively lower emphasis than their counterparts

on each action/improvement program.

At worst, it appears that the caretakers, as a group, have no manufacturing

strategy and are not renewing their manufacturing function. At best, their
manufacturing strategy is passive.

Analysis and Discussion

Measures: Measuring manufacturing performance is becoming an area of concern for

manufacturers. In particular nonfinancial measures of performance.

Innovators:
Attaching more importance to performance measured by the percent of new products/models

introduced on time. They are less likely to be concerned with personnel problem indicators,
such as the ratio of white collar to blue collar workers, headcounts, or the number of

grievances.
About the same relative degree of importance as the marketeers on manufacturing lead

times, and the level of outgoing quality.

Marketeers:
Personnel measures are more important to the marketeers as are changeover and setup

times, and work in process inventories.

Caretakers:
Interestingly, the caretakers tend to give lower ratings overall to each manufacturing

performance indicator. This is further evidence that the caretakers are playing out an
endgame in the product life cycle.

Summary and Conclusions

Consensus among researchers about the key elements of a manufacturing

strategy.

Manufacturing task, as measured by the importance given to competitive

capabilities like quality, flexibility, delivery, cost, must be linked to manufacturing
strategy choices, and that both should link to the business strategy.

Manufacturing Taxonomy

Three distinct types of manufacturers can be identified by the importance they

place on competitive capabilities: caretakers, marketeers, and innovators.

Similar to Miles and Snow's (1978) taxonomy; prospectors, differentiators and

defenders are similar to the innovators, marketers, and caretakers.

The differences between categories of strategy were shown to be related to two

underlying market characteristics: the degree of market differentiation and market
scope.

Consistency of Purpose

Significant differences exist in certain capabilities, actions, and measures among the
strategy groups.

Research supports the notion that a manufacturing strategy is related to product life
cycles.

Innovators:
Relatively short product lives, demonstrate the characteristics of start-up firms in

product life cycle theory.

Manufacturing strategy heavily influenced by engineering and research and

development functions. Plan frequent modification of the business unit's production

processes and new product introduction capabilities.
Special emphasis on reduced manufacturing and product development lead times.

Consistency of Purpose

Marketeers:
Have well established products and markets; pursue manufacturing strategies

characteristic of a business in more mature phases of the life cycle.

Manufacturing strategy choices are oriented towards improving the reliability of the

manufacturing process.
Quality control programs especially prevalent.

Caretakers:
Demonstrate the characteristics of businesses in the declining stages of the life cycle.
Have no clear cut pattern of action programs or performance measures related to the

manufacturing task.
One reason for that is that there is price competition in mature /declining markets;

leads them to think short term, and to merely react to the current situation rather than
to take any coherent strategic steps for the long term.

Future Research

Limitations:
The cases examined represent a biased sample of U.S. industry. Hence, the

proportion of firms in the caretaker group is probably underestimated.

Future research should attempt to obtain a broader representation of caretaker

businesses.
Correlated error problem that derives from the use of one respondent for all of the

data gathered from each firm is another limitation.

Future lines of inquiry, should consider using multiple sources of information and

methods to reduce this problem.

Study provides no visibility into the relationships between manufacturing strategy

and performance outcomes. E.g. what factors characterize good and bad
marketeers or innovators?

Future Research

An important line of future research is to test the stability of this taxonomy globally,
and over time.

The "laws" of business that seem to define the strategic positioning and competitive
behavior in this and other taxonomies have all been based on observations of the
business environment during a short 20 year span.

Intelligent competitors will use their knowledge of the "normal" rules of battle to better
develop new principles of competitive warfare, then we may anticipate that new
manufacturing strategic groups will be formed over time, and in different parts of the
world.